Yen weakens across board after BOJ delivers rate hike
U.S. dollar, Euro, Yen and Pound banknotes are seen in this illustration taken May 4, 2025. REUTERS/Dado Ruvic/Illustration
NEW YORK/LONDON, Dec 19 : The yen weakened sharply against the dollar and other major currencies on Friday as traders drove it towards levels that could trigger official buying after the Bank of Japan raised rates to a 30-year high but did not offer clarity on future hikes.
The yen fell against the dollar after the BOJ lifted its policy rate to 0.75 per cent from 0.5 per cent in a move that had been well-telegraphed by policymakers, prompting traders to sell.
Losses in the Japanese currency extended after BOJ Governor Kazuo Ueda's post-meeting press conference, where he remained vague on the exact timing and pace of future rate hikes.
The dollar rose as much as 1.2 per cent on the day to a high of 157.48 yen, hitting its high level in four weeks and on track for its largest one-day rise since early October. It was last up 1.19 per cent at 157.410 yen.
The euro hit a record high of 184.60 yen while the Swiss franc hit an all-time high of 197.23 yen. The sterling rose by as much as 1.22 per cent to its highest since 2008, at 210.58 yen.
"I think most of the currencies are consolidating but the big one, of course, is the yen," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
"The BOJ delivered a rate hike like everybody expected and indicated that they will continue to raise should the economy evolve as they expect. The yen is weaker across the board. I think many people are saying that the BOJ was not hawkish enough," Chandler added.
In Friday's statement, the BOJ maintained its view that underlying inflation will converge around its 2 per cent target in the latter half of its three-year projection period through fiscal 2027. It reiterated real rates were at "significantly" low levels even after the hike, and pledged to continue tightening should the economy and inflation pan out as forecast.
But none of this was enough to halt the slide in the yen.
Traders have started to consider the chances of official intervention to support the currency once the yen crossed the 155 level against the dollar in November.
The last time Tokyo authorities stepped into the market to intervene was July 2024, when the dollar/yen rate hit 161.96, the most since the mid-1980s.
Japanese Finance Minister Satsuki Katayama warned on Friday that Tokyo would take appropriate action to deal with any excessive volatility in the foreign exchange market. "We will respond appropriately to excessive moves, including those driven by speculators," she said.
EURO STEADIES
European Union leaders decided on Friday to borrow cash to fund Ukraine's defence against Russia for the next two years rather than use frozen Russian assets, sidestepping divisions over an unprecedented plan to finance Kyiv with Russian sovereign cash.
The euro held steady at $1.1716. The European Central Bank chief Christine Lagarde on Thursday offered no forward guidance and said all options were on the table, pushing back against more hawkish members. The ECB left its policy rate on hold at 2 per cent, as expected.
Sterling round-tripped to sit at $1.3378 after the Bank of England cut interest rates to 3.75 per cent, as expected, but the decision was closer-run than the market had anticipated, which may limit the room for further easing.
Overnight, the dollar had briefly weakened following a sharp and unexpected fall in U.S. inflation, but investors were not sure how far to trust the data since collection was interrupted by the U.S. government shutdown, and the move soon retraced.
Elsewhere, the Australian dollar strengthened 0.14 per cent versus the greenback to $0.662 while the kiwi weakened 0.36 per cent versus the greenback to $0.5753.
The dollar strengthened 0.04 per cent to 7.035 versus the offshore Chinese yuan.
In cryptocurrencies, bitcoin gained 2.86 per cent to $88,051.37. Ethereum rose 5.15 per cent to $2,973.43.
